Scomi Energy Unit Defaults on RM 55 million Worth of Bonds

Scomi Energy Services Bhd (SESB) unit, KMCOB Capital Bhd (the issuer), has defaulted on paying back the principal of RM 55 million Series E bonds due on 14 December 2019. The bond issued under the RM 320 million Guaranteed Serial Bond facility is guaranteed by Danajamin Nasional Berhad via the financial guarantee insurance facility. As of 30 November 2019, the outstanding amount under the bond facility was RM 105 million.

SESB is a service provider to the oil and gas, and coal industries which the services include drilling and completion services, offshore support and marine logistics services. Its unit, KMCOB Capital Bhd, was established to manage the issuance of private debt securities, the proceeds from the issuance, and the refinancing exercise of the private debt securities.

KMCOB Capital Bhd has approximately RM 22 million in the sinking fund and short of RM 33 million to repay the Series E bonds. Despite default on the redemption, KMCOB Capital Bhd will still be paying the coupon of the Series E bond to the bondholders, which is also due on the same date as redemption.
Scomi Energy Services Bhd and its unit, KMCOB Capital Bhd, had taken several measures to address the default.

KMCOB Capital Bhd had submitted a formal request to the bond trustee, TMF Trustees Malaysia Berhad, to seek a remedial period from the bondholders.

On 10 December 2019, Scomi Energy had accepted an offer by MIDF Amanah Investment Bank Bhd to provide bridging financing for the repayment of the RM 55 million Series E bonds. Unfortunately, the drawdown from the bridging financing could not be done before the redemption date due to insufficient time to fulfill the conditions precedent and security arrangement.
At this point, no legal action has been taken by the trustee of the bondholders, TMF Trustee Malaysia Bhd or Danajamin Nasional Bhd, as SESB is expediting the process to fulfill the requirements for the drawdown from the bridging financing within the remedial period.

Read What Happens When Your Bond or Sukuk has Defaulted?

Sources: The Edge Markets, The Star